5 Things Entrepreneurs Should Know About Business Partners

With more online avenues, finding a fellow entrepreneur can be easy and profitable

1. Business partnerships aren’t exactly popular—but that’s all the more reason to have them. Somewhere between 50 and 60 percent of start-ups are founded by just one person, according to research cited by Scott Shane, A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University, in his recent book The Illusions of Entrepreneurship. But what’s more, they like it that way: One study he mentions says that 63 percent of entrepreneurs say that other people are helpful to them in their work, compared with 74 percent of people in general. The kicker, however, is that Shane goes on to show evidence that most entrepreneurs make the wrong decisions—they make decisions that make their businesses less likely to succeed. In the case of business partners, Shane says the evidence shows that businesses founded by teams of entrepreneurs are more likely to succeed than those founded by a single entrepreneur. Working with a business partner can give an entrepreneur a competitive advantage that many others don’t have.

2. Partnering with family and friends can work—just be aware of the risks.
The mom and pop business is the stereotypical image of a small business, and the trust that comes with working with someone you know on a personal level seems comforting. But new risks come up when you take a personal relationship and make it business. “There are many cases where trying to build a business relationship on top of a personal relationship can ruin both,” says Tim Berry, an entrepreneur who founded Palo Alto Software and speaks and teaches on small-business issues. Berry recently named one of his daughters CEO of his company. He says that partnering with family members can work as long as you carefully delineate the business relationship and personal relationship and make it clear that the way you interact with them in the first will be different from in the second. Rich Sloan, who cofounded StartupNation—an outlet for practical information and networking for entrepreneurs—with his brother Jeff, warns against assuming that because you are personally close with your business partner, each knows what the other is thinking when it comes to business. “You have to treat a family relationship at least as professionally as a third-party relationship,” he says.

3. It has never been easyto find partners outside of your immediate circles.
The ideal choice for a partner is someone who shares your vision and working style. That person might not be among your family, friends, or local connections. There are now several online avenues for entrepreneurs to find like-minded people. Partnerup.com works like dating websites but for matching businesspeople with similar interests instead of lovelorn singles. You can fill out a profile about your skills and how you want to get involved and then network with other people on the site. But to actually search other people’s profiles, you have to pay a monthly fee of $24.99. One problem with using online networking to find partners is that it’s easy for a person to show one side of him or herself online. “You get less about people’s failures than their successes on the Internet,” Berry says.

4. “Dating“ a potential business partner first can prevent heartache later.
Starting a business involves a lot of commitment, and making those commitments with someone who turns out not to be what you expected can be disastrous. The relationship with a business partner is ultimately like the most important relationships in one’s personal life. “To meet up at a coffee shop and be ‘romanced’ by a partner and quickly jump into it is a dangerous game,” says Sloan. “You want to accumulate as much time as possible [with someone] before you formalize any kind of partnership.” You can cooperate with potential partners on small projects to see their style before you take any kind of plunge. For example, many small businesses don’t even have an official, written-out business plan, but working on a detailed business plan with a partner can be a good way to see if their values and goals are in sync with yours.

5. Maintaining a long-distance business relationship is not as challenging as it used to be.
What about practical problems that pop up when business partners are located on other sides of the country, if not the world? For example, who pays the bills, and how do you coordinate that? Billingorchard.com is a service that lets you handle all your billing electronically, and it’s all in your Web browser, not a program to be downloaded. So business partners from any location can log in and deal with invoicing online rather than worry about who has the paperwork.